Apple: A Global Leader in Supply Chain Management

Apple Inc., formerly Apple Computer, Inc. was founded by Steve Jobs, Steve Wozniak and Ronald Wayne on April 1, 1976. By the summer of 1976 Ronald Wayne had left the company but the two Steve’s persevered and launched the Apple 1 Computer. This was the first of many trend setting products to be developed and released by Apple over it’s now near 40 year history.

While under the leadership of John Sculley, Jobs and Wozniak left Apple in 1985. Steve Jobs returned to his roots in 1997 and eventually became CEO, taking control of the company and bringing Apple back from near bankruptcy to profitability by 1998. Under the legendary leadership of the late Steve Jobs, the Apple brand was successfully re-established, and is arguably the most innovative company in the world today with a loyal customer base devoted to the brand.

Tim Cook, joined Apple in 1998 just after Steve Jobs re-entered the company, and helped transform Apple’s messy operations into a global supply chain success. He become Chief Operations Officer in 2005 and was handed picked by Jobs to take over as CEO in 2011. Cook is a world-renowned supply chain expert who is credited with streamlining Apple’s supply chain, helping create the most powerful supply chain in the world.

Apple Inc. has evolved over the years, from its humble beginnings of products being assembled in Steve Jobs garage to the “World’s Most Valuable Brand“, worth $741.8 billion today. Last year alone Apple reached 170.9 billion in revenues under Cook’s leadership. Much of Apple’s recent success is attributed to Cook streamlining its supply chain by outsourcing manufacturing and helping the company to reduce inventory levels.

A Glimpse into Apple’s Ever Evolving Supply Chain

When it comes to Apple’s supply chain management (SCM) practices, there are conflicting views on their success but many people believe that its supply chain model, extraordinary inventory control and sophisticated software systems are the secret weapons that keep them on top of the global leader board.

Apple’s Supply Chain has ranked #1 in the world each year from 2010 to 2013 by research firm Gartner. In 2014 Gartner placed Apple in a new masters category for demonstrating sustained leadership in their supply chain and defining the very notion of a “solution” supply chain, blazing new trails with its demand creation capabilities.

Simplicity seems to be effective for Apple in more ways than one. From their sleek logo, to their clean product designs, to their slogan “think different”, right down to these simplified supply chain planning and management models.

“Apple purchases components and materials from various suppliers and ships them via air, to save time and money, to the assembling plants in China. From there, products are shipped (via FedEx or UPS) directly to consumers who purchased Apple products from their on-line store.” – Sourced from supplychain247.com

“Tim Cook believes that when it comes to technology such as smartphones, tablets and laptops, inventory deprecates very, very quickly, losing 1-2% of value each week – “inventory is fundamentally evil” he says. “You kind of want to manage it like you’re in the dairy business. If it gets past its freshness date, you have a problem.”

“A great amount of Apple’s supply chain success can be attributed to them continuing to design their products in California, while leveraging the lower cost of outsourcing manufacturing to China.” – Original quote from Jonathan Hamilton (IT Consultant)

Some re-sellers may also distribute products from the competing manufacturers

Inventories can become obsolete or exceed the anticipated demand

Some components are currently obtained from the single or limited sources

Some custom components are not common to the rest of the industries

Ability to obtain components in sufficient quantities is important

Supply chain disruption such as the natural and man-made disasters can be serious

Company depends on logistical services provided by outsourcing partners

Company also relies on its partners to adhere to supplier code of conduct

Although Apple is recognized as a global leader in supply chain management, the company has received criticism for its suppliers unethical labor practices; including child labor, workers being seriously injured from repetitive motions during long shifts, and stress-related worker suicides.

The Impact of Social Media on Apple’s Supply Chain

There is no evidence suggesting Apple uses social media to streamline its supply chain, however social media has played a role in the evolution of its supply chain.

It’s no surprise that Apple’s supply chain has faced challenges. A blog written in 2012 by former student, Cory Kingsbury, drew my attention to allegations of labour abuses at an Apple supplier factory in China including child labor, serious physical injuries of workers from repetitive motions during long shifts, and stress-related worker suicides.

Apple was called out by one of their fans, using social media to launch a protest on Change.org over the allegations of suppliers violating labour laws. The message spread like wildfire through various social media channels and “In less than 48 hours, the petition grew from a few hundred supporters to more than 140,000, many of whom identified themselves as Apple fans.” – Cory Kingsbury

These allegations caused many to question the strength and ethics of Apple’s supply chain and demanded Apple “think different” and use their power to improve worker conditions.

Apple’s Response to Outcry on Social Media

Apple responded by implementing a Supplier Code of Conduct and pledged to fight worker abuses, committing to the highest standards of social and environmental responsibility and ethical practices.

“Around the globe, Apple employees are united in bringing equality, human rights, and respect for the environment to the deepest layers of our supply chain.” – Jeff Williams, Senior VP of Operations

They also vowed to conduct internal audits to ensure suppliers are compliant, and any violations of the Code could jeopardize their business relationship with Apple, up to and including termination. Apple committed to providing updates and reports on their findings. Here is Apple’s most current report: 2015 Apple Supplier Responsibility Report.

In an effort to make themselves even more transparent and gain back the trust of their customers. Apple being notorious for keeping secrets, also shocked everyone when they unveiled 97% of their overall supply chain, revealing names of 156 of their key suppliers.

This is a great example of how Apple took a negative situation, spread quickly through social media, and used it to strengthen their supply chain further.

Lessons Learned

While challenges with supply chain responsibility are not unique to Apple, the company’s record profits and tremendous brand value make it an easy and highly visible target. Despite the fact that Apple’s supply chain has faced challenges, they continue to be a global leader in SCM. Key factors attributing to their success include: putting their customers first, streamlining processes to create exceptional inventory management, outsourcing manufacturing, and by continuing to evolve their supply chain to adapt to customer demands.